Companies Act - Commencement of business etc (Section 11)

Introduction

You plan to incorporate company that manufactures Hand Sanitizer. So, you have prepared memorandum, articles. Submitted those bulky documents, declaration, id proofs and what not. Registration is done. Registrar have given you Corporate Identification Number. All good.

Can you start manufacturing of Hand Sanitizers ? Can you commence business immediately once registration is done? 

Manufacturing Software: The Rise of the Smart Factory - SensrTrx ...

Well yes, but there are some provision for Company having share capital. (Almost all companies have share capital).

Section 11 provides some pre conditions for commencement of business.

Section 11  mainly deals with below important points
  • Conditions to be fulfilled before commencement
  • What if conditions are not fulfilled-Punishment.
  • Action by Registrar
Let's discuss the section in bit detail.

Section 11- Commencement of business

Pre Conditions

First, a declaration should be filed by Directors of the company. Such declaration must have below things.
  • That every subscriber to memorandum have paid for the shares they have taken. (Nothing unpaid share by subscriber) 
  • The paid up share capital should not be less than 5 Lakh for public company and 1 Lakh for private company. (Of course, this is one of the requirement for incorporating those companies)
Second, a verification of registered office has to be filed with registrar.

Above conditions must be fulfilled to commence the business.

What if you don't fulfill those and still commence a business ?

Consequences

Company have to pay the fine if they go against this section. The amount of fine is only 5000 Rs. Also every officer(Officer of Company) who did not follow the provision of this act shall be liable for fine which could be extended to 1000 Rs for each day during which non compliance continues. This is provided in Section 11(2).

A small company /big company fine is same. Shouldn't this be more for bigger companies earning huge profits and less for smaller companies ? Who cares !

Action by Registrar

The declaration stated in precondition, if not filed in 180 days then registrar could initiate action. What action ?

If registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may initiate action for removal of name of company from the register of company under Chapter XVIII. 

So yes, register can remove the name from register of company if provisions of this section are not complied with related to declaration to be made to him.


Conclusion

Before proceeding with business and earning Crores of profit, you have to make some declaration. You have to make registrar happy.




Comments

  1. aadhiyapoongothaiMarch 22, 2021 at 4:56 AM

    The first step is to open a organization financial institution account. Commute Vakilsearch website to Form 20a

    ReplyDelete

Post a Comment

Followers

Popular posts from this blog

Privileges and Immunities to Administration in Suits

Introduction You know government can enter into contracts. Government can start some business. It mean government can sue other people, or you can sue the government. Before you initiate a legal proceedings against government, or even after legal proceedings are initiated, there are some relaxations to government.( OK, we will use Government/Administration as per our discretion interchangeably in this post, but they will mean the same ). So, it might happen that to prove something you may need a document or evidence, but government may be given exemption to produce evidence in that regard. Let's take one example.  General law is that burden of proof is on prosecution. Meaning, the one who accuses other  needs to prove the crime/offence by other. But when government accuses you of Sedition, you have to prove your innocence, burden of proof is on YOU. This is scary, as many times government in power just accuses people of sedition who opposes their ideas/policies, and put oppone...
Read more

Legal History-Administration of Justice in Bombay (1668-1726)

Image
Story About Bombay In 1534, Portuguese acquired Bombay from Local Hindu Raja. Then Bombay was given to King Charles II as dowry in his sister's marriage to in 1661. In 1668 Bombay was given to rent to East India Company for a rent of 10  £ . By today's exchange it would be around 100 Rs. So  yes, Bombay was given on rent to East India Company for the price of 10 Vada-Pav. Administration of Bombay was subordinate to Surat back then. After renting it, company issued a charter in 1668 granting company some rights to make laws to deal with Bombay. Like Administration in Madras, development of Earlier administration could be studied in 3 stages. First Stage: 1670-1683 (Aungier Eara) During this period Bombay was subordinated to Surat. The Governor of Surat was ex-officio Governor of Bombay, though Bombay had Deputy Governor and Council. Gerald Aungier brought some changes in Administration of justice. Two plans, i.e plan of 1670 and plan of 1672 made progress in so...
Read more

Legal History-Madras Settlement (1639-1726)

British established it's first factory in Surat. As they expanded they established factories in other town such as Madras, Calcutta and Bombay. Francis Day got piece of land from Hindu king for the East India Company in 1639. East India Company got a town named as "Madraspatanam". (Don't tell this to UP CM Yogi, or else he will rename Madras). British Established fortified factory were Englishmen would stay. Till 1665, Madras was subordinate to Surat. Now town was divided into two divisions. In fortified area, Englishmen and European used to stay which was known as "White Town", whereas villagers stayed outside were known as "Black Town" Study of development of legal administration is divided into three stages. We can divide in as many stages as we want, provided we have certain distinguishing criteria for each division. Let's see each stage with some more details. First Stage-1639-1665 (Black town, white town, choultry court) Th...
Read more